Network News

Even after two decades writing about the personal finance aspects of housing, Elizabeth Razzi finds there’s always more to talk about. Buying and selling, improving, insuring, squabbling with the homeowners association -- whatever the housing topic, let this be your virtual back fence.

Chat Plus: Talk About That $8,000 Tax Credit

Every other Friday, 1-2 p.m., Post Real Estate Editor Maryann Haggerty and I host a live chat about all things real estate. This is one of the good questions we couldn't cover on Friday.

Q: I'm finally in a position to buy a first home (good job, credit score 800, 5%-10% down payment saved, no consumer debt). I got very excited when I heard about the $8,000 first-time buyer tax credit, but then a friend told me it caps at a modified adjusted gross income of $75k. Yikes! Even with my 401(k) deduction of $13k, I don't get down to $75k. What's the thinking behind this? How do you afford house with a MAGI of less than $75k, and also save for retirement, pay student loans, save for kids' education, etc? Isn't pushing people who can't really afford a home unless they put all their savings and income into it part of how we got into this mess?

MH: The full tax credit is available to single filers with modified adjusted gross of $75,000. At that point; it begins phasing out; it disappears at $95,000. For married couples filing jointly, the full credit is available with income up to $150,000; it disappears at $170,000. This IRS provides a clear explanation (really!) of this and other details of the credit. Note that there are distinct differences between the 2008 and 2009 credits.

ER: There's a difference between pushing and enticing, and this tax credit was designed to entice people back into a scary housing market and to stimulate the economy. It offers some cushion against the risk that prices will continue to go down. We also need to remember that this deal is offered nationwide, not only in high-wage, high-expense areas such as Washington. (And I'm fully aware that even in Washington there are many, many people not pulling in $88k-plus, as you are.) In particular, there are a lot of married couples, in Washington and elsewhere, with combined incomes of $150,000 or less who can take full advantage of this tax break -- and who will still have savings left after buying their first home.

MH: The U.S. median household income was $50,233 in 2007, the most recent number available, according to the Census Bureau. The median is the point where half the households are above and half below.